Ria recently started working at a financial institution. She has been advised of the importance of saving and the benefits of diversifying her investments. As such, she is considering investing in shares of Ohio Inc. Ohio Inc. just paid an annual dividend of $4.10 and has pledged to increase its dividend by 2.4% annually over the next five years. Thereafter it will maintain a constant 2.5% dividend growth rate annually. Ria’s required return is 15%. Required: Compute the price Ria should pay for a share of this stock today.

Ria recently started working at a financial institution. She has been advised of the importance of saving and the benefits of diversifying her investments. As such, she is considering investing in shares of Ohio Inc. Ohio Inc. just paid an annual dividend of $4.10 and has pledged to increase its dividend by 2.4% annually over the next five years. Thereafter it will maintain a constant 2.5% dividend growth rate annually. Ria’s required return is 15%. Required: Compute the price Ria should pay for a share of this stock today.

Personal Finance

13th Edition

ISBN:9781337669214

Author:GARMAN

Publisher:GARMAN

Chapter13: Investment Fundamentals

Section: Chapter Questions

Problem 4FPC

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